A Portrait Of A Country Awash In 'Red Ink'

July 30, 2012

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As the federal debt balloons, reducing it would seem more and more pressing. Yet policymakers remain far apart. Debt, deficit and budget rhetoric is often accompanied by numbers cherry-picked to support a particular political view.

But a new book by Wall Street Journal economics writer David Wessel lays out the numbers that both political parties face.

"In the early 1980s, about 10 percent of the federal budget went to Medicare and Medicaid," Wessel tells NPR's Renee Montagne. "Now, it's about a quarter of all spending, and it's on the way to 33 percent of all spending unless something happens to change the trend."

The book is called Red Ink: Inside the High-Stakes Politics of the Federal Budget, and it breaks down the budget in stark terms: how the government spends its money, who pays what in taxes, and why politicians can't reduce a potentially catastrophic debt load.

Wessel tells a story about one politician who didn't pay his taxes: Richard Nixon. Nixon wasn't required to disclose his tax returns as a candidate, but he was embarrassed when they were leaked to the Wall Street Journal — revealing that he had paid barely any taxes between 1970 and 1972. "That turned out to be a huge scandal at the time," Wessel says, "and in fact, it was that report that led Richard Nixon to utter his famous words, 'I am not a crook.' "

Nixon ended up having to pay a lot of back taxes, "but that's kind of lost to history, because the Watergate scandal obscured it," he adds.

Tax returns are also an issue for current presidential candidate Mitt Romney, who has been reluctant to release his records. "I think that in the Romney-Obama contest, the question is not only how much did Mitt Romney pay in taxes, but what should the government policy be toward taxing people at the top," Wessel says. He identifies three questions on which the candidates disagree: First, does the U.S. need more tax revenue in order to bring down the deficit? Second, if it gets more tax money, from whom should it come? And third, how much should we rely on the tax code to close the gap between winners and losers in our economy?

"People who made over a million dollars last year got about 12 percent of all the income in the United States, and paid about 18 percent of all the federal taxes," Wessel says. "If you take the famous top 1 percent ... they got 17 percent of the income and they paid 25 percent of the taxes." Politicians and voters disagree on whether that's fair, Wessel adds, but that's a question of political judgment, not numbers.

But what about those who pay no taxes at all? Wessel says 46 percent of households paid no federal income tax at all last year — many of them lower income households that are exempt, people who take advantage of tax breaks offered by the government, and retirees. "A lot of them don't have much money, that's true," Wessel says, "but I think it's also contributed to a kind of sense that they're only taking from the society and not giving to it. ... [It] creates a political problem, it makes them feel like they're outside the system, and it leads to a lot of resentment."

Wessel says he hasn't heard any substantive talk about the budget from either party on the campaign trail. "It's hard to get a consensus, a political consensus for doing what we have to do if people aren't getting straight talk," he says. "It is simply not true that we can solve our deficit problem only by taxing the top tier of people, and it's very unlikely that we can cut spending enough to solve the deficit without raising taxes on pretty much the bulk of the American people."

If he were moderating the campaign debates, Wessel says, he'd ask each candidate for five proposals to combat the deficit. "How much would they do in tax increases? How much would they do in cutting defense spending and so forth," he says. "A budget is a way to put into specifics what your belief system is. So it would be good if we could somehow force the candidates to say, yes, I differ from my opponent, here's my recipe, and then people would know what they would do if they were elected."

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